Latin, EU Leaders OK New Round of Talks

Summit: A transatlantic nontariff trade pact, though years away, would lessen U.S. dominance in Latin America.

RIO DE JANEIRO — Although insisting that a proposed Europe-Latin America free-trade zone is not directed "against" the United States, 46 heads of state took a historic first step Tuesday toward lessening the dominance of Uncle Sam in his own backyard.

Latin and European leaders agreed to start nontariff negotiations in November on a transatlantic trade deal to include the 15-nation European Union and the Mercosur trade bloc--of Brazil, Argentina, Paraguay and Uruguay. There is no target date to complete the talks, which will take years.

Other Latin countries would presumably join in future years, completing what German Chancellor Gerhard Schroeder called an "Atlantic triangle" of trade. There are U.S.-Latin and U.S.-Europe trade deals, but a Europe-Latin America leg is missing.

Though their comments were sheathed in diplomatic niceties, it was clear that many Latin leaders here at a first-ever Euro-Latin summit are chafing under the dominance of the United States in hemispheric trade issues, from bananas and Cuba to capital flows and monetary policy.

"I wouldn't say it's a defensive move," said Jose Antonio Graca Lima, Brazil's top trade negotiator, referring to the prospective trade deal. "But we want to avoid a situation where trade flows could be distorted because there is a dominant partner."

The free trade agreement would be part of a "multipolar world" in which Europe and Mercosur would be a "counterpart hub," Brazilian President Fernando Henrique Cardoso said at a post-summit news conference, adding that the United States should see it as no threat.

Flexing their newfound solidarity, the leaders also announced plans to try to form a united front in dealing with the United States in the next round of global trade talks to begin in Seattle in 2000. Such a front could avoid, in the words of one delegate, any "unilateral" U.S. setting of policy at the critical meeting .

Latin and European leaders will meet in coming months to work out policy proposals to present at Seattle, including how to control the volatility of capital flows, Mexican President Ernesto Zedillo said.

Capital flight fueled the financial crises that have swept developing nations in recent years. The U.S. opposes any limits on the movement of capital across borders.

But on Tuesday, Schroeder said a new and "safe" financial architecture was one of three "main areas" of agreement reached by summit delegates.

All 46 countries agreed to a clause opposing "extraterritorial" laws, a slap at the U.S. Helms-Burton Act penalizing countries that do business with former U.S.-owned firms confiscated by Cuba. But language in the preliminary draft that specifically condemned the U.S. law was left out of the final version signed Tuesday.

Trade between Latin America and the 15 EU nations totaled $95 billion in 1997, compared with $106 billion between the U.S. and Latin America. Brazil alone figures it could add $5 billion a year in exports under a trade deal with Europe.

Europe fears that gap could widen as a result of ongoing talks to expand existing free trade among the United States, Mexico and Canada to include all the Americas. Europe has already seen trade with Mexico fall off since passage of the North American Free Trade Agreement in 1994.

At the news conference, Cardoso said both the EU and Latin American countries recognize that they will have to make significant concessions on protected industries. The EU spends $30 billion a year subsidizing agriculture, and Brazil and other countries shield their financial services and textile industries.

"Everyone's afraid of the unknown," Cardoso said.

The heads of state said they accepted Spain's offer to host the next summit of European and Latin American leaders in 2002, "but we will not stop talking in between," Schroeder said.